May 15, 2020
Episode 9 - Is it actually hidden? "The Tokyo real estate market"  

We introduced what real estate investors in Japan consider to be of particular importance when selecting areas in the previous episode. It has been said that the real estate in Japan still has a strong domestic tendency that is not open to the world when compared to other countries overall, including information disclosure and the number of actual transactions. For example, cross-border transactions as a percentage of total real estate transactions (by city) are 61% for London, 43% for Sydney, 32% for New York, 31% for Shanghai, 30% for Beijing, 21% for Hong Kong, and then 12% for Tokyo, which ranks quite low among the major cities.

 

Figure 1

Crossborder transaction

 

 

 

 

 

 

 

 

 

 

 

 

 
*Source: Prepared by International Interface based on the “Environmental Improvements for the Internationalization of the Real Estate Market” (April 2016) from the Land Economy and Construction and Engineering Industry Bureau of the Ministry of Land, Infrastructure, Transport and Tourism

 

Is Tokyo really a difficult market for foreigners to enter? Although that is a common perception, that doesn't always seem to be the case.

For example, let’s compare Tokyo with other regions in Asia. If you compare each country's restrictions on foreign ownership of real estate transactions based on the scope covered by the Japan's Ministry of Land, Infrastructure, Transport and Tourism (MLIT) database that lists real estate transaction regulations for countries in Asia and the Middle East (this is an excerpt of the main countries, not an exhaustive list of all countries), you can see that for out of 22 countries (Hong Kong is not included in China), only Japan has no direct restrictions on foreign ownership of land.

 

Figure 2

landright

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
*Prepared by International Interface based on the “Overseas Construction and Real Estate Market Database” from the Ministry of Land, Infrastructure, Transport and Tourism.

 

In Figure 1 we can see that for London, with a cross-border transactions ratio of 61%, and Paris, with a ratio of 40%, have no direct restrictions on foreign ownership of land, and that Japan is at least as tolerant of cross-border transactions as the countries at the top despite its low ratio of cross-border transactions.

Of course, tolerance alone may not be the deciding factor when selecting an area to invest in. In fact, only 13.7% of investors responded that the ease of obtaining individual information related to real estate investment decisions was "excellent" in their assessment of the Japanese real estate market, suggesting that a domestic source of real estate information in Japan may be a bottleneck.

Although are many other criteria for making a decision, looking at the low percentage of cross-border transactions that does not match the maturity of Tokyo as a city, the Tokyo real estate market may be a hidden gem as a good investment destination where only a limited number of people have access to information (such as investors who can speak Japanese and investors who have reliable partners in Japan). (We'd be happy to support you as a partner!)

In the next episode, we will focus on investments in Japan in a little more detail. We hope that you will read it.

 

Sources:
“Environmental Improvements for the Internationalization of the Real Estate Market” (April 2016) from the Land Economy and Construction and Engineering Industry Bureau of the Ministry of Land, Infrastructure, Transport and Tourism
 “Overseas Construction And Real Estate Market Database” from the Ministry of Land, Infrastructure, Transport and Tourism.
“Overseas Investors Questionnaire Survey” (2018) from the Ministry of Land, Infrastructure, Transport and Tourism.

 

To know more about Japan market and invest here, please talk with our agents either in English, Chinese or Japanese.

Disclaimer:

Neither International Interface nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.